Docstoc

Making Poverty the Policy Priority - Combat Poverty Agency

Document Sample
Making Poverty the Policy Priority - Combat Poverty Agency Powered By Docstoc
					                        Making poverty the policy priority




                        Proposals for Budget 2007
pre-budget submission

                        Issue         Proposal                              Beneficiaries   Cost (€m)
                        Welfare payments
                        Personal      Increase lowest rate payments by           564,160
                        rates         €20 per week
                                      Increase non-contributory state             97,220         879
                                      pension and other payments by €18
                                      per week
                                      Increase contributory state and            313,120
                                      related pensions by €15 per week
                        Qualified     Increase lower rate by €16 per week         82,395
                        Adult         Increase contributory pension rate          35,580            86
                        Allowance     by €13 per week
                        Child payments
                        Child         Increase by €10 per month                1,144,500         139
                        Benefit
                        Early         Increase by €1,000 per annum for            61,450            61
                        Childcare     children (3-4 years) attending pre-
                        Supplement    school (one year only)
                                      Provide annual payment of €500 for         338,570         169
                                      children aged 6 to 12 years
                        Child         Increase the two lower CDA rates to        255,230            50
                        Dependant     standard rate of €21.60 per week
                        Allowances    Pay higher rate of €25 per week for        107,720            28
                                      children over 12
                        Clothing      Introduce two additional payments          156,000            50
                        and           of €120 (< 12 years) and €190
                        Footwear      (≥ 12 years), in December and in
                        Allowance     March
                        Family        Increase threshold by €68 per week          21,000            49
                        Income
                        Supplement
                        Delivery of   Pay child benefit and the early       Existing        Admin
                        payments      childcare supplement fortnightly      recipients      cost
                                      Make the payment of clothing and
                                      footwear allowance automatic
                                      for recipients of means tested
                                      payments.




October 2006
                                                                                                        1
    Issue         Proposal                                 Beneficiaries    Cost (€m)
    Welfare reform
    Parental      Introduce new means-tested               Not                     86
    allowance     parental allowance (at standard          available
                  personal rate) for the principal carer
                  in families with young children
                  (< 8), replacing the One Parent
                  Family Payment and the Qualified
                  Adult Allowance under Job Seeker’s
                  Allowance and Illness Benefit.
                  Provide an earnings disregard
                  of €120 per week, with tapered
                  withdrawal of 40 per cent up to
                  €400 per week
    Means-tests   Increase the means disregard for               25,340          23.5
                  state pension by €20 per week
                  Increase the threshold for
                  entitlement to full rate Qualified
                  Adult Allowance by €20 per week
                  Increase the upper income ceiling
                  for tapered Qualified Adult
                  Allowance by €30 per week
                  Increase the upper income ceiling
                  for entitlement for half-rate CDAs       Not                     15
                  by €50 under Job Seeker’s Benefit        available        (estimate)
                  and Illness Benefit
                  Increase the earnings disregard
                  for the Supplementary Welfare
                  Allowance rent/mortgage
                  supplement to €100 per week,
                  with tapered withdrawal of 50
                  percent up to €150 per week
    Childcare     Introduce a vouched childcare       Not                   Not
    costs         disregard on earnings of up to €100 available             available
                  per week (1 child; with up to €50
                  per week for additional children),
                  under all means-tested schemes,
                  including Family Income Supplement
    Medical       Increase income thresholds for           Not              Not
    card and GP   medical cards by €16 per week for a      available        available
    visit card    single person, €74 for a couple and
                  €12 for each dependent child
                  Reduce the expenditure threshold
                  under the Drugs Refund Scheme to
                  €50 per month for households on
                  doctor-only medical cards
    Savings       Work with MABS to develop a pilot               1,000            0.6
    scheme        savings scheme for low-income                 initially
                  households
    Taxation
    Income tax    Increase PAYE tax credit by €82 per
                  annum
                  Increase personal tax credit by €90                             677
                  per annum
2
Issue          Proposal                                 Beneficiaries   Cost (€m)
Taxation (continued)
Income tax     Widen tax band by €1,760 per
               annum
               Adjust all other credits and
               exemption limits by 5.5 per cent
Tax reliefs    Monitor tax reliefs to ensure that
               higher earners pay a minimum 20%
               rate of income tax
               Restructure state support for PRSA       Not             Not
               pension contributions as a matching      available       available
               ‘tax credit’
Indirect       Ensure there is no increase in
taxes          indirect tax rates
Fuel poverty
Fuel costs     Increase fuel allowance by €4                 266,000           1
Energy-        Increase investment in Sustainable                               5
efficiency     Energy Ireland’s Warmer Homes
               Scheme
               Enforce minimum standards of             Not             Not
               thermal efficiency in the private        available       available
               rented sector
Alternative    Taper subvention of Sustainable
energy         Energy Ireland’s Greener Homes
               Scheme towards low-income
               households
               Ensure all new social housing is
               fitted with alternative energy
               sources
Food poverty
Food costs     Increase welfare payments (see
               above)
               Improve access to food retailers at
               local level, including discount stores
Availability   Establish €10 million fund for                                  10
of healthy     community initiatives providing
food           alternative sources of healthy food
               for low-income households
               Provide a hot school dinner (or               200,000           10
               equivalent) to all children from low-                    (estimate)
               income families under the School
               Food Programme
Waste charges
Waiver         Introduce a national waiver system       Not             Not
system         covering both public and private         available       available
               collection, to be implemented by
               local authorities and financed by a
               national waste collection levy




                                                                                    
Introduction                                                            • Increase the contributory state pension by €15
                                                                          per week
Combat Poverty has a statutory remit to advise on
all aspects of public policy pertaining to poverty.                     Qualified adult allowance
The annual Budget is a key policy opportunity to
                                                                        • Increase lower rates by €16 per week
impact on poverty. The theme of our submission,
Making poverty the policy priority, is appropriate as
                                                                        • Increase contributory pension rate by €13 per
Budget 2007 marks the completion of the 10 year
                                                                          week
National Anti-Poverty Strategy. Budget 2007 also
heralds the beginning of a new social partnership                       ESRI research shows that increasing welfare rates
programme (Towards 2016) and the development                            is the key way to reduce poverty.1 In Ireland, cash
of a new National Action Plan against Poverty and                       transfers are currently 20 per cent less effective in
Social Exclusion, which aims to make a decisive                         reducing poverty than the EU average 2.
impact on poverty by 2010.
                                                                        The Government has set a target for welfare
The submission outlines budgetary actions which                         payments to reach at least €150 per week (2002
will reduce income poverty and address the                              values) by 2007. Adjusting for inflation, there is
structural causes of poverty. This can be achieved                      a shortfall of between €9 and €17, while the
through:                                                                shortfall for a wage-adjusted target is €26. Given
                                                                        the continued health of the public finances, we
• Increasing the incomes of social welfare recipients
                                                                        recommend an increase of €20 in the lowest
                                                                        welfare rates in Budget 2007.
• Maximising benefits for children in poverty
                                                                        The contributory pension is just short of the
• Rewarding participation in the labour market
                                                                        Government target of €200 per week. However
                                                                        there is a shortfall of €18 on the means-tested state
• Fostering equality in the tax system
                                                                        pension. We believe that the €200 target should
• Protecting the living standards of vulnerable                         apply to both types of pension and recommend an
  consumers                                                             increase of €18 per week in the non-contributory
                                                                        pension.
We assume a tax/welfare budget package of €2.6
billion, similar to Budget 2006. Almost half of this                    We recommend an increase of €15 per week for
is devoted to welfare improvements; 2 percent                          the contributary state and related pensions.
goes to supports for children and the remainder is
                                                                        The amount received by spouses or partners of
allocated to tax reductions. Our proposals seek to
                                                                        welfare recipients (Qualified adult allowance or
maximise the impact of this expenditure on labour
                                                                        QAA) is critical given the absence of individual
market activation and educational attainment.
                                                                        entitlement in the Irish welfare system. This
                                                                        payment is currently 66 percent of the personal
                                                                        welfare rate. An official review of equivalence
Budget recommendations
                                                                        scales highlighted the inadequacy of this payment 
Welfare payments                                                        and in Budget 2002, the Government agreed
                                                                        to increase it to 70 percent. We propose that
Personal rates
                                                                        this target should be met over two years with
• Increase lowest welfare rates by €20 per week                         an increase of €16 per week for most welfare
                                                                        categories in Budget 2007 and a €1 rise for the
• Increase means-tested state pension and related                       contributory pension.
  payments by €18 per week


1
    T Callan et al (2004) Why is Relative Income Poverty so High in Ireland? Dublin, ESRI.
2
    Eurostat (2005), Income poverty and social exclusion in the EU25. Statistics in focus. Population and social conditions.

    Report of the working group examining the treatment of married, cohabiting and one-parent families under the tax and social welfare
    codes (1999), Dublin: Stationery Office



4
Child payments                                         We recommend that the ECS is extended to 6-12
Child benefit                                          year old children at a rate of €500 per year in
                                                       recognition of continuing childcare costs for this
• Increase child benefit by €10 per month
                                                       age group.
Early childcare Supplement
                                                       Child support payments to welfare-dependent
• Increase the early childcare supplement by €1,000    families vary according to age from a low of
  per year for 3-4 year old children attending pre-    €20.40 per week for dependent children aged 19 to
  school (maximum one year)                            21 years to a high of €72.75 per week for children
                                                       under 6 years. An additional €12 per week is
• Provide annual payment of €500 for children
                                                       needed to bring the payment for older children up
  aged 6-12 years
                                                       to 5 percent of the adult rate in line with National
                                                       Anti-Poverty Strategy target.
Child dependant allowance
• Increase the two lower rates of child dependant      Child dependant allowances (CDAs), as a result
  allowance to the standard rate of €21.60 per         of being frozen in value since 1994, have fallen
  week                                                 from 71 percent of the total child income support
                                                       package to 0 percent in 2006. The bulk of child
• Introduce a higher CDA rate of €25 per week for      support is now employment neutral. We therefore
  children over 12                                     believe it is timely to review CDAs as a targeted
                                                       mechanism for supporting children at risk of
Clothing and footwear allowance                        poverty.
• Introduce two additional payments of €120
  (< 12 years) and €190 (≥ 12 years), in December      CDA rates currently differ depending on the
  and in March                                         welfare status of parents. This cannot be justified
                                                       on the basis of need. We recommend that payments
Family Income Supplement                               are standardised at €21.60 for all children aged
• Increase the income threshold by €68 per week        0–12 years with a higher payment of €25 for
                                                       children over the age of 12 to compensate for the
Delivery of child supports                             higher costs of older children.
• Pay child benefit and the early childcare
  supplement fortnightly                               The Clothing and Footwear Allowance is an
                                                       effective, targeted mechanism to assist with child
• Make payment of Clothing and Footwear                related costs at the start of the school year. We
  Allowance automatic for all recipients of means      propose that the payment should be repeated in
  tested payments                                      December and March.

Combat Poverty supports universal child support        We recommend two specific reforms in the delivery
payments as they deliver a larger proportionate        of child income supports: Firstly, the introduction of
gain to low-income households. Although the            a fortnightly payment option for child benefit and
Government target of €150 per month has been           the Early Childcare Supplement; and secondly, the
met, we recommend continued investment in child        automatic payment of the Clothing and Footwear
benefit and propose an increase of €10 per month       Allowance to all welfare-recipients on means
in Budget 2007.                                        tested-schemes.

We propose an increase in the Early Childcare          Welfare reform
Supplement (ECS) of €1000 per year for  to 4
                                                       Parental allowance
year old children attending pre-school. Linked to
this is the need to increase provision of pre-school   • Introduce a new means-tested parental allowance
education under the National Childcare Investment        (standard personal rate) for the principal carer in
Programme.                                               families with young children (< 8), replacing the
                                                         One Parent Family Payment and the Qualified
                                                         Adult Allowance.


                                                                                                            5
• Provide an earnings disregard of €120 per week,                        (OPFP) with a new parental allowance. This would
  with tapered withdrawal of 40 per cent up to                           facilitiate lone parents to move out of poverty.
  €400 per week                                                          Expanded childcare provision and enhanced support
                                                                         structures for lone parents to take up employment
Means tests                                                              are critical to this reform.
• Increase the means disregard for state pension by
  €20 per week                                                           We also recommend reforms to means tested
                                                                         welfare schemes to improve the financial position
• Increase the threshold for full rate Qualified                         of low income households. This applies to the state
  Adult Allowance by €20 per week                                        pension, the income threshold for retention of
                                                                         the Qualified Adult Allowance and the earnings
• Increase the upper income ceiling for tapered                          disregard for recipients of the Supplementary
  Qualified Adult Allowance by €30 per week                              Welfare Allowance (SWA) rent and mortgage
                                                                         allowance.
• Increase the upper income ceiling for half-rate
  CDAs by €50 under Job Seeker’s Benefit and                             A vouched childcare disregard of €100 per week
  Illness Benefit                                                        under all means-tested schemes, including FIS,
                                                                         should be introduced to support participation of
• Increase the earnings disregard for the                                low-income families in employment.
  Supplementary Welfare Allowance rent/mortgage
  supplement to €100 per week, with tapered                              Medical card thresholds should be significantly
  withdrawal of 50 percent up to €150 per week                           increased to enhance access to health and social
                                                                         services for poor families, particularly those with
Childcare costs                                                          children. We also propose a lower expenditure
• Introduce a vouched childcare disregard of up                          threshold under the Drugs Refund Scheme for
  to €100 per week (1 child) and €50 per week                            households with a GP Visit Card as this scheme
  for each additional child, under all means-tested                      is currently hampered by a lack of support with
  schemes, including FIS                                                 medicine costs.

Medical card and GP visit card                                           As SSIAs draw to a close, there is an opportunity to
• Increase the thresholds for medical cards by €16                       develop a targeted saving scheme for low-income
  per week for a single person, €74 for a couple                         households, similar to the Savings Gateway, a UK
  and €12 for each dependent child                                       pilot scheme linked to a community financial and
                                                                         learning project.4 The proposed two-year scheme,
• Reduce the expenditure threshold on the Drugs                          run in conjunction with (MABS), would have the
  Refund Scheme to €50 for families with doctor-                         following components:
  only medical cards
                                                                         • a savings requirement of €1 to €5 per week or
Savings                                                                    €5 to €25 per month
• Develop a pilot savings scheme for low-income
                                                                         • a top up of €1 for every €1 saved, to a maximum
  households in conjunction with MABS
                                                                           of €600
Reforms to the welfare system will ensure that it
                                                                         • a minimum savings period of 6 months.
remains relevant to changing economic and social
trends.                                                                  The cost of the scheme per 1,000 participants would
                                                                         be €1 million.5
We support proposals in the Government Green
Paper to replace the One Parent Family Payment

4
    Kempson et al (2005), Incentives to save: encouraging saving among low income households. Final report on the Saving Gateway pilot
    project. Personal Finance Research Centre, University of Bristol.
5
    For more details, see 2005 Pre-Budget proposal from the MABS National Advisory Committee to the Minister for Social and Family Affairs
    for the introduction of a savings incentive scheme for low-income households.



6
Taxation                                                                A cap on incomes for pension contribution could
Income tax                                                              help to fund this.
• Increase PAYE tax credit by €82 per annum
                                                                        Recent Combat Poverty 8 research on indirect
                                                                        tax shows that low income households pay a
• Increase personal tax credit by €90 per annum
                                                                        significantly higher proportion of their incomes in
                                                                        indirect taxes than the most affluent households.
• Widen tax band by €1,760 per annum
                                                                        Some pro-poor elements are built into the indirect
• Adjust all other credits and exemptions limits by                     tax system, but scope to make the indirect tax
  5.5 percent                                                           system more progressive is limited. We recommend
                                                                        that increases in indirect taxes should be avoided
Tax reliefs                                                             on equity grounds.
• Monitor tax reliefs to ensure that high earners
  pay a minimum 20 percent rate of income tax                           Fuel poverty
                                                                        Fuel allowance
• Restructure state support for PRSA pension
                                                                        • Increase by €4
  contributions as a matching ‘tax credit’
                                                                        Energy-efficiency measures
Indirect taxes
                                                                        • Increase coverage of the SEI Warmer Homes
• Ensure there is no increase in indirect tax rates
                                                                          Scheme
Tax policy should continue to reduce the tax burden
                                                                        • Enforce minimum standards of thermal efficiency
on low-income households. Income tax reductions
                                                                          in the private rented sector
in Budget 2007 should be indexed in line with wage
growth. This implies an annual increase in the PAYE                     Alternative energy sources
tax credit of €82 and the personal tax credit of
                                                                        • Improve and taper subvention of the SEI Greener
€90. The tax bands should be widened by €1,760
                                                                          Homes Scheme
for a single person and pro-rata for other groups.
                                                                        • Ensure that all social housing is fitted with
Tax expenditures (e.g. tax reliefs and incentives)
                                                                          alternative energy sources
reduce the fairness of the tax system and cost some
€8.8 billion6. With total tax take close to €0
                                                                        Energy prices have risen significantly since 2002
billion, there is potential to increase the tax base by
                                                                        and further increases are imminent. As price hikes
up to 25 percent by reducing such expenditures.
                                                                        continue, the number of households unable to
                                                                        adequately heat their home looks set to rise.
All tax expenditures should be reviewed with a
view to keeping the tax base as wide as possible.
                                                                        We recommend an increase in the standard-rate
In cases where the retention of the scheme is
                                                                        fuel allowance, of €4 to €18 per week (29 weeks
deemed appropriate, caps or ceilings should be
                                                                        per year). Payments should be offered at suitable
used to minimise deadweight loss.
                                                                        intervals to prevent low income families running
                                                                        into debt or going without fuel. Public investment
Tax reliefs on pensions are inequitable, as they
                                                                        to alleviate fuel poverty has, to date, focused on
primarily benefit high income groups. Future
                                                                        current measures, such as fuel allowances. However
state support for supplementary pensions should
                                                                        a longer term view and capital investment is
be focused on lower earners. Our proposal is for
                                                                        needed to tackle domestic energy inefficiency and
matching contributions for pension contributions
                                                                        eliminate fuel poverty. If this was done we believe
in the form of a tax credit, as in the SSIA scheme.7


6
    Department of Finance (2004a). Tax Incentives/Expenditures and Broadening the Tax Base, Tax Strategy Group Paper 04/22. Department of
    Finance: Dublin.
7
    Pensions Board (2005), National Pensions Review, Dublin: author
8
    Combat Poverty Agency (2006), Promoting Equity in Ireland’s Tax System, Dublin



                                                                                                                                            7
that over time the fuel allowance could be rolled                             households (e.g. community gardens, food
back into mainstream welfare payments. Future                                 cooperatives)
savings on the cost of the scheme could then be
reinvested in the continued roll-out of a capital                          • Provide daily hot school dinner (or equivalent) to
expenditure energy-efficiency programme.                                     all children from low income families under the
                                                                             School Food Programme
We recommend a substantial increase in capital
investment programmes such as the Warmer Home                              Income constraints and limited access and
Scheme operated by Sustainable Energy Ireland                              availability of healthy food can make it extremely
(SEI). This seeks to increase the thermal efficiency of                    difficult for low income households to consume
housing among lower income groups, who typically                           a healthy diet. One recent study estimates that
cannot afford the cost of making their homes more                          households on welfare would have to spend
energy efficient.                                                          between 8 and 80 percent of their weekly income
                                                                           to buy a healthy diet.9 This may be higher for those
Another programme delivered by the SEI, the                                on special diets for medical reasons.
Greener Homes Scheme, aims to reduce domestic
reliance on fossil fuels by allocating grants to                           Food items are a significant component of higher
homeowners who intend to install a renewable                               inflation trends, reaching almost 10 percent in
energy heating system in their home. In order to                           May 2006 (despite the abolition of the Groceries
boost the take-up of alternative energy sources                            Order). A number of measures are needed to
in low-income households, we recommend that                                assist low-income households to benefit from
funding under this scheme should be tapered                                price competition in the grocery trade including:
so that low-income households get a higher                                 enhancing access to discount and other food
subvention of the capital costs of fuel switching. In                      retailers at local level; ensuring availability of a
addition, strong consideration should be given to                          greater selection of appropriately sized economy-
the incorporation of such technologies into planned                        line foods and enhancing transport facilities and/or
new social housing schemes.                                                free delivery of purchases. This will require action
                                                                           by local planning authorities, food retailers and
The level of fuel poverty among the private rented                         national government.
sector in Ireland is almost three times higher than
that found among mortgage-holders, as there                                Community initiatives in the UK and to a lesser
is little incentive for either landlords or tenants                        extent in Ireland have proven to be effective in
to invest in costly energy-saving measures. A                              helping families on low-incomes to access sufficient
regulatory approach is required to bring all private                       and varied food to meet their requirements.10
rented housing up to a minimum standard of                                 These include food co-ops, community gardens,
energy efficiency. We recommend the introduction                           food banks and community cafes and are often
of a minimum thermal-efficiency standard, i.e. a                           located in areas of concentrated disadvantage with
‘U-value’, enforceable by law.                                             limited food outlets. We recommend a €10 million
                                                                           fund over three years to support such initiatives.
                                                                           Food producers and distributors should have a role
Food poverty
                                                                           in supporting these initiatives.
• Ensure welfare payments are adequate to
  meet costs of a healthy diet (see earlier                                Low nutritional intake can affect children’s capacity
  recommendations)                                                         to learn and contribute to health complications,
                                                                           especially where associated with obesity. Combat
• Ensure greater access to food retailers at local                         Poverty recommends that the School Food
  level, including discount stores                                         Programme, which was introduced to address
                                                                           this issue, should provide a hot school dinner or
• Provide a €10 million fund to support alternative
                                                                           its equivalent to all low-income children. This
  sources of healthy food for low-income

9
     S Friel et al (2004) The Financial Cost of Healthy Eating in Ireland, Combat Poverty Research Working Paper 04/01
10
     Department of Health and Children (1999), Building Healthy Hearts, Cardiovascular Health Strategy, Dublin, Stationery Office




8
programme could be extended to all schools in                                Distributive and poverty impact of
the long-term, with a tiered payment scheme
                                                                             proposals
to minimise stigma, extend coverage and bring
important health benefits for all school children.                           The distributive analysis of our proposals is
Capital investment and staff will also be required.                          carried out using the ESRI tax/welfare model,
                                                                             SWITCH, which takes into account variations in
                                                                             individual and family circumstances relevant to
Waste collection charges                                                     tax liabilities and welfare entitlements.1 Diagram
                                                                             1 outlines the distributive impact of our proposals
• Introduce a national waiver system covering both                           for the population divided into 10 equally sized
  private and public waste collection, implemented                           income groups. This is benchmarked against a
  by local authorities and financially supported by a                        wage-indexed ‘neutral’ budget whereby welfare
  national waste collection levy.                                            payments and tax/credit bands are assumed to
                                                                             increase in line with wage growth for 2007 (5.5%).
Wide disparities exist in the waste practices
                                                                             The additional amount available for redistribution
adopted by local authorities11 and recent increases
                                                                             in our proposals is €750 million.
have put a significant financial strain on many
low-income households. In 2005, Combat Poverty                               Our proposals provide for an average gain in
published guidelines for the implementation of a                             disposable household income of 1 percent, the
national waiver system for low-income households.                            cash equivalent of €6.50 per income-sharing unit.
We believe that waiver schemes should be                                     However, because of the welfare and child focus
implemented through local authorities, maintaining                           in the proposed budget, the gain is concentrated
continuity with current practice. This policy should                         towards lower income households, with the
be supported through a central fund, which                                   poorest decile getting a 6 percent increase, the
could be at least part-funded by a national waste                            equivalent of €11.0 per week. The second to
management levy.                                                             fourth poorest deciles also get an above average
                                                                             increase, of between 2.5 and 4 percent (cash
                                                                             increases of between €11 and €12). By contrast,
Cost of proposals                                                            the richest four deciles benefit marginally from the
The cost of the Combat Poverty proposals for                                 budget proposals, with modest cash increases of
Budget 2007 is €2.6 billion. With the positive                              between €1 and €2.50 per week. Households with
state of the public finances, this is an affordable                          children do better than those without children.
package that is in line with the outturn in Budget                           This is especially the case in non-working families,
2006. It also avoids the dangers of an expansionary                          whose income rises by between 7 and 9 percent.
budget, which has been highlighted by some                                   Unemployed people and retired households also
commentators.12                                                              do better.

There are significant differences in how the
package is allocated compared to Budget 2006.
The amount proposed for social welfare increases is
€17.5 million, or 18 percent higher than in Budget
2006. The allocation on child support is similar,
though proposed spending on targeted payments
is higher. The tax package is reduced by €211m (25
percent) against Budget 2006, as the proposed tax
changes are capped at wage-indexation.


11
     Combat Poverty Agency (2005), Implementing a Waiver System. Guidelines for local authorities.
12
     ESRI Quarterly Economic Commentary, Summer 2006
1
     The SWITCH tax/welfare model is based on a nationally representative sample of households. For further information on the model and
     its use as a tool for analysing tax/welfare policy, see T Callan et al, 2001 Reforming tax and welfare, Dublin: Economic and Social Research
     Institute. SWITCH is a well-established policy tool for analysing the first round effects of tax and welfare policies, which is used by the
     Departments of Social and Family Affairs and Finance, including the poverty proofing of the Budget.



                                                                                                                                                    9
Diagram 1: Distributive impact of Combat Poverty                                  Diagram 2: Impact on relative income poverty
2007 Budget proposals, benchmarked with wage-                                     of Combat Poverty 2007 Budget proposals,
indexed budget (+5.5%)                                                            benchmarked with wage-indexed budget (+5.5%)
(% gain by equivalised disposable income per                                      (% fall in persons, older people and children below
decile)                                                                           median income thresholds)

 6           5.85                                                                 30
                                                                                                                                all
                                                                                                                                over 65s
                                                                                                                                children
 5                                                                                25


                    3.98    4.0
 4                                                                                20



 3                                                                                15
                                  2.61


 2                                                                                10

                                         1.14
 1                                                                                 5
                                                0.66
                                                       0.33
                                                              0.22
                                                                     0.1    0.1
 0                                                                                 0
                                                                                          50 percent        60 percent           70 percent
                                                       h

                                                              h
             m




                                                                     h

                                                                           p
                                         h

                                                h
                             d

                                  h
                     d




                                                       7t

                                                              7t

                                                                     9t

                                                                           to
                                         5t

                                                6t
                           3r

                                  4t
                    2n
          tto
        bo




-1



Diagram 2 outlines the impact on relative income                                  Conclusion
poverty of our proposals. Looking first at the
                                                                                  This submission argues that poverty – income
number of people in poverty, there is a reduction at
                                                                                  and deprivation – should be the policy priority in
each of the three income thresholds, ranging from
                                                                                  Budget 2007. Combat Poverty’s budget package of
18 percent at the 50 percent threshold to 4 percent
                                                                                  €2.6 billion is affordable given the government
at each of 60 and 70 percent thresholds.14 In terms
                                                                                  finances. As well as directly boosting households
of the extent to which people are below each of
                                                                                  on low-incomes, the measures will have a wider
the poverty lines, this has also declined, by between
                                                                                  social benefit in addressing the underlying causes
9 and 20 percent. We can also break down the
                                                                                  of poverty. The outcome of the budget proposals is
analysis to examine vulnerable sub-groups, notably
                                                                                  a substantial reduction in relative income poverty,
the elderly and children. For older people, the
                                                                                  especially for older people and children, which will
poverty risk falls by 14 percent at the 50 percent
                                                                                  assist in Ireland meeting its shared EU objective of
line, and 6 percent and 1 percent at the higher
                                                                                  making a decisive impact on poverty by 2010.
lines. The impact is higher again for children, with
a reduction of 27 percent at the lowest line, and 9
and 8 percent at the higher lines.15




14
     The median income is the adult equivalent of €4 per week, equal to €216.5, €260 and €0 at each of the three income thresholds.
15
     In terms of absolute change, the overall fall is between 0.7 and 1.4 percentage points. For older people, it is between 0.6 and 2. percent
     and for children, between 1.2 and 2 percent.



10
     Combat Poverty Agency, Bridgewater Centre, Conyngham Road, Islandbridge, Dublin 8.
     Tel. 01 6706746 Fax. 01 6706760
     E-mail: info@combatpoverty.ie Website: www.combatpoverty.ie
12

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:0
posted:12/6/2013
language:Unknown
pages:11